How Facebook Gets Away With Being Broken On Purpose | Betabeat

At the New York Times, a trend is not a trend until it happens to a New York Times columnist.

For roughly a year now–almost six months since I wrote a wildly popular column about it for The Observer–Facebook has been pushing an utterly duplicitous and embarrassing business model.

The scheme: Facebook posts are seen by only a woeful fraction of a company’s total fans or subscribers (often less than 15 percent). And conveniently, that percentage is controlled by Facebook, while the site simultaneously offers an expensive “service” that allows companies to pay to reach its own fans. This throttling quickly became a source of millions of dollars of revenue for the social network.

It’s about as plain and malignant a case of conflict of interest can get. One that only Facebook would dare to try.

Small businesses and entrepreneurs have reacted vehemently against it, even going as far as to create a protest called “I Want My Friends Back”. Mark Cuban threatened to stop using the platform over it. Hell, the whole thing is old enough that the inevitable counter-backlash already came and went.

But only now, when Nick Bilton at the New York Timesexperienced it himself, did the phenomenon suddenly hit the top of Techmeme.

Some of the tweets from Bilton’s colleagues are pretty amazing: “I dunno, I kind of feel like we knew this was coming eventually,” writes Anthony De Rosa, a Reuters columnist and social media editor.

Indeed! We knew it because it already happened.

Felix Salmon, also of Reuters, tweeted back to Bilton at the Times, “Insofar as it applies only to fans/subscribers rather than actual friends, surely not a big deal.”

Except that’s not true either. In October, TechCrunch revealed that Facebook was expanding the program so that users needed (or could choose, depending on your interpretation) to pay $7 to extend the reach about “important announcements” like weddings, garage sales or parties.

I don’t mean to pile on any of these well-meaning writers. (Some, like Zach Seward at Quartz, pretty much nailed it with his analysis of how Facebook tweaks “the black box that is EdgeRank,” in order to promote and incentivize features). They are right to be outraged and perplexed. Facebook’s pay-for-placement program is ridiculous. Except it’s been ridiculous for quite some time. And apparently part of the reason Facebook has been able to get away with it is that few media gatekeepers, who are supposed to follow this stuff for a living, know how the platform really works.

The common dismissal I’ve seen from far too many journalists–“how else should Facebook make money?”–implies that they or their sources just don’t understand the ad business. They aren’t able to see that Facebook’s sponsored story play is fundamentally different from most ad models.

Take Tumblr’s new ad platform Radar, on which I have done six-figures worth of buying for my client American Apparel. To create it, Tumblr designed entirely new advertising space on the platform that people have to pay to be a part of. In that case, buyers didn’t previously have access to it so if they want it, they have to pay for it. Tumblr’s interest is to make that space as attractive and valuable as possible to buyers, so they’ll pay for it. In this case, our interests are aligned–however long it took Tumblr to get here.

That’s very different from Facebook’s model, in which the worse Facebook posts ‘work’ for brands, the more brands will need to pay Facebook. That means that Facebook and I now have divergent interests. Intentionally or not, the less my posts show up, the more I need to spend to cover the difference, especially since brands have invested in and become dependent on Facebook over the years.

Facebook has put itself in an ugly position. Even if they’re not doing anything with it right now—it looks like they easily could. To me, it doesn’t seem any different than someone like Goldman Sachs or any financial firm being short a position that they turn around and sell to an unsuspecting client as an investment. The worse it does for their client, the better it is for the house. Why even risk the potential impropriety? Greed is the only answer. I seem to remember we fined a ton of Wall Street analysts during the first dotcom bubble for exactly such a maneuver.

Does Facebook have a ‘right’ to operate this way–to throttle access and charge unequally for passage? As a for-profit company, they absolutely do. It’s just bafflingly shortsighted–and borderline unethical–to anyone who really thinks about it for two seconds.

I’m just starting to realize that most tech media have neglected to do that.

And THAT is why Facebook has gotten away with this appalling bait-and-switch. That’s how they’ve been boldly able to be (and remain) broken on purpose.

Ryan Holiday is the bestselling author of  Trust Me I’m Lying: Confessions of a Media Manipulator and a PR strategist for brands and writers.